Originally from Ireland, Michael Devereux, Economics professor in the Vancouver School of Economics and co-editor of the International Journal of Central Banking, has been unraveling the mysteries of International Macroeconomics and Finance for the past 30 years. Running away from high unemployment and political instability he first set foot on Canada in the eighties to complete his post doctorate studies at Queens, in Ontario. Fortunately for us, except for research trips to visit some of his international coauthors, he has not left since then. At UBC he now divides his time between his research on exchange rates and his advisory positions at the Royal Bank of Canada and the Federal Reserve Bank of Dallas.
I look at a couple of different topics revolving around International Economics and Finance. In recent years I have been quite interested in looking at how emerging market economies are affected by shocks or recessions in advanced countries, such as US, Canada or Europe. The economies of the emerging markets, like those of China, Indonesia or Brazil tend to be much more volatile and vulnerable than those in advanced countries. Immediately after the financial crisis there was a massive inflow of capital into these countries and then about a year and a half ago it all flew out again. Thus these countries have experienced big shifts in their exchange rates, trading volumes, and inflation levels. By looking at the data I have been trying to explain what are the essentials distortions or problems in international capital markets that give rise to this volatility and vulnerability. In principle, if markets work efficiently these countries should be gaining from access to foreign investment but in reality it is not clear they are doing so all the time.
Understanding what exchanges rates do to economies has been a long-standing question of mine. I have been working for the past thirty years of my career in finding out how exchange rates are determined and, in particular, what are the basic elements that lead to large swings in exchange rates. An example of this is the way the Canadian dollar has largely moved with respect to the American dollar not only in recent years but also over the past few decades. My research is both about understanding what rises that and what are the consequences of it for trade, prices, and ultimately individuals.
I initially did my degree and my Masters in Ireland, in Dublin in the early eighties and I was interested in international economic issues even then. I came to Queens to do my PhD and there were a couple of specialists in that area there that inspired me to spend the rest of my career working on international financial markets. A big draw of the field has been the network of people that I meet and interact with that are from all over the world. I have coauthors in Asia, in Europe, in the US, in Canada.
It is a great luxury to work on things that I think are important without having anyone telling me what job I have to do. At the same time it is a lot of work and it is not a stress free occupation. Indeed, you can spend many months a year working on a project and then wait for some more months for it to get published because of unexpected difficulties. It is not total bliss, but for me it is better than having an agenda set by a boss. The freedom is definitely something I value. It is not for everyone though, many economists prefer to work at policy making bodies. There is a certain allure to that too.
When I was an undergrad I was not really sure about what I wanted to do afterwards. I thought I would become a school teacher. It was only when I decided to go back to school to do a Masters that I got the excitement and taste for research. When I graduated in Ireland in the early eighties the country was in a deep recession and thus they were no jobs available. Since I really enjoyed Economics I decided to continue with a PhD and I came to Ontario for that purpose. I really liked the learning and understanding that came with the research so I looked for an academic job right after finishing my PhD.
Economics offers a way of looking at the world that has a kind of unifying perspective to it. Unfortunately, media’s view of economists is hugely different from what actual people do in this department. Some of the junior faculty members here are doing incredibly interesting work that would not fit into anyone’s narrow minded view of what economists do. We do much more than just looking at market prices while assuming everyone is a rational maximizer. I think different economists have different points of view and I am very open to perspectives from psychology, sociology and anthropology. Disciplines evolve and economists are now much more willing to be interdisciplinary than they were before. The one thing though that you learn in graduate school in economics is an incredibly powerful set of tools for analyzing the real world and data. In order to understand the world you need to be able to separate cause and effect. You need to be able to know whether what you are observing is real or not and a set of statistical and econometrics tool are essential for that. I believe economics departments are the best places within the social sciences to learn those tools.
The freedom and the ability to work on what I want. I also really enjoy teaching, especially interacting with students. It helps you in staying young as you are always meeting students that are in their early twenties and they are full of fresh ideas. I learn a lot from students because they give you new perspectives. I have also taught some great graduate students that I have kept in touch with over the years.